Do Minors have to pay Income Tax?

A child who is less than 18 years old is a minor. Do minors have to pay Tax on their Income? Lets take a look.

Minors can earn an income from bank accounts, fixed deposits or other investments made in their name by the parents. Any Income that accrues or is paid to a minor is clubbed with the Income of the parent under section 64(1A). ‘Clubbing’ means such Income gets added to the parent’s income and is taxed just like it is the Parent’s own income. So in case you are hoping to save tax by investing in the name of your children – such income will be added to your Income and taxed accordingly.

If both spouses are earning –The Income of the minor shall be clubbed with the income of the parent, whose total income (before inclusion of the minor’s income) is greater.

In case the marriage does not exist, the income of a minor shall be clubbed with the parent who maintains the child.

If both the parents are not alive the income of the minor child is not clubbed with the guardian, a separate income tax return is filed for the minor.

Exceptions – In the following cases the income of a minor child is not clubbed.

  • When a child earns an income by way of any work or from an activity which uses his talent or special knowledge and experience – the minor shall pay tax on it and such income is not clubbed. For example, when a minor wins from a dance show or a talent hunt, the prize money is not clubbed with the income of a parent.
  • Income of a child suffering from any disability specified under section 80U will also not be clubbed with the income of the parent. Under Section 80U a person is considered specially abled when suffering from not less than 40% of any of these – Blindness, low vision, leprosy cured, hearing impairment, locomotor disability, mental retardation and mental illness.

Deductions allowed

  • When Income of minor child is Rs 1500 or more – the parent can claim an exemption of Rs 1500 for each minor child whose income is clubbed.
  • When Income of minor child is less than Rs 1500 – the entire amount is allowed as a deduction.

 

Can a minor have a PAN – yes a PAN card can be applied for a minor.

Hope this helps you make a wise decision while investing for your children! In case you have any questions do comment or reach out to us!

 

 

 

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